Tunisia, Morocco and Egypt: a new global hub for social impact start-ups

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Ben Hamadi Zouhour does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

How can we explain the meteoric rise of social-oriented start-ups in countries where economic indicators remain weak?

According to the data company Mattermark, while for several years North African start-ups mainly flourished in sectors like e-marketing and online dating, since 2012, they have begun appearing in areas such as banking, health, lending, currencies and e-commerce.

New businesses and collaborative economics

This trend towards collaborative economics makes sense in emerging markets where the start-up business is a little under ten years old.

Since these countries began to attract the interest of foreign investors, several generic accelerator programmes have popped up, such as Flat6labs in Tunisia, and Innov Invest and Numa in Morocco.

Foreign backing helps finance such businesses, which are seen as unstable and insecure, and consequently receive little or no funding from traditional local banks which bridle at the prospect of a slow return on investment. It should be noted that these countries have retained a European-style investment model mainly based around banking institutions. For young entrepreneurs, foreign backing may be the only available funding source.

Besides the “investment gap” left by the banking sector in countries that refuse to finance start-ups, foreign investors have also noticed the significant opportunities for positive social impact.

These young unemployed people are for the most part talented, ambitious, unfazed by change and interested in new technologies – skills sets that represent real value for investors speculating on the new economy.

While the Egyptian and Tunisian revolutions were not necessarily responsible for the rise of these start-ups, they helped drive their proliferation. The new generation has realized that it can play by a new set of rules. The Arab Spring freed up young people and taught them that change is not impossible and they are capable of controlling their own destinies.

An emphasis on social projects

My research on start-ups and young entrepreneurs has revealed one striking common attribute: whether Tunisian, Moroccan or Egyptian, they are overwhelmingly socially oriented. Knowing their countries’ economic difficulties, they are driven to fight unemployment, not just by launching their own businesses, but also by improving the lives of their fellow citizens.

For example, Tunisian start-up BeThree, the brainchild of three students from the Esprit engineering school, has succeeded in developing a smart bracelet that detects abrupt changes in cardiac rhythm and arterial blood pressure in order to prevent heart attacks.

A few months ago, this start-up was in talks with Wonka Lab, a Los Angeles-based start-up accelerator. “Wonka Lab offered to help us develop our product for the American market,” one of the entrepreneurs told French newspaper Le Monde.

Casablanca start-up Carmine facilitates car sharing, a solution for young professionals who cannot afford to buy their own vehicle. As it is still in operation, with an increasing number of available stations, the business is thinking about expanding its mission to include other Moroccan cities.

There are also start-ups in the crowd-sourcing sector, such as Egyptian company Bassita (“simple” in Arabic), which found an innovative way to raise money to provide access to clean drinking water for more than a thousand households. In 2014, this same model was used to raise the funds needed to buy a thousand pairs of glasses for embroiderers in one of the poorest regions; in 2015, it allowed thirty children who had never seen the ocean to spend a day by the Red Sea.

Moroccan start-up Safa, also created by students, at the Mohammadia engineering school, developed a clay-and-wood water filter. They decided to employ housewives to build the filters and gave them a share in the profits.

Regardless of country or industry, today’s start-ups are vulnerable because of their heavy dependence on private investment during the seed phase, which can discourage backers.

Start-ups will have a significant role to play in the economic future of these countries. They now have to attract the attention of policy makers in order to obtain better regulatory and fiscal conditions for their development.